Recipe for Economic Catastrophes

Gold is not a bubble
Wolf Wave
Black Swans and Fat ladies

The "When hope turns to Fear" moment (See 2010 Outlook "When hope turns to
Fear" in Tedbits archives) is unfolding as we speak, as the tides of insolvency
sweep over the social welfare states and financial systems of the developed
world. It is the next leg down in the global financial crisis and what will
come to be known as the greatest depression ever is commencing -- we are fascinated
and astonished at what the main stream media is reporting and failing to report.

No amount of PONZI finance or money printing will rescue the Western world
from its immorality masquerading as morality. SOCIALISM is IMMORAL and that
is why it always FALLS into BANKRUPTCY. As Margaret Thatcher once said:

"The problem with socialism is that eventually you run out of OTHER PEOPLE'S
MONEY" - Margaret Thatcher

Of course they now have. The idea that asset values (malinvestments) or economies
are going to resume growth or achieve pre-2008 levels is FALSE. Extend and
pretend is DEAD, political lies are being exposed for what they are: Deception
of the dumbest among us who swallow them hook, line and sinker and who then
place their trust in government to solve problems they themselves should be
solving. Let's look back at a chart of the percentage of GDP the West's social
welfare states CONSUME and then MISALLOCATE to the unproductive and crony capitalist
elites:

Simple math tells you that if budget deficits approach 10% of GDP these freeloaders,
socialist redistributionists and misallocations of capital must cut government
spending by 20% to restore ANY CHANCE for a private-sector recovery. FAT chance;
but even a reduction of 1/3rd of that will bankrupt many of the crony capitalists
and their LENDERS.

Instead they are implementing another power grab in the name of reform and
believe that when it comes to spending they only know one word: MORE. The more
public serpents and elites try to preserve the absurd in the name of JUSTICE
and FAIRNESS, the farther recovery becomes the horizon.

Authors note: The world is AWASH on a sea of FIAT currency and credit
creation. The only places where there is no cash are (1) welfare-state
government coffers, as economic activity collapses tax receipts, and (2)
on the balance sheet of the largest players in the financial system who
are choking on the toxic assets they themselves created and borrowed money
to buy.

At no time in history have assets -- stocks, bonds, real estate, etc.
(malinvestments inflated by cheap credit) been more MISPRICED, and since
the value of fiat currency as a unit of exchange is unknowable (not measured
in GOLD or silver), prices are set to REPRICE and create VOLATILITY rarely
seen in history -- other than previous "CURRENCY EXTINCTION" events such
as Argentina, Weimar Germany and unfolding in VENEZUELA right now. Volatility
is exploding and set to increase, creating HUGE opportunities as these
markets zoom up and down. Learn how to fix your paper currencies and diversify
into absolute return alternative investments with the potential to thrive
in UP and down markets! This is what I do, contact me!

Keep the corner of your eye on Venezuela; this is where the developed
world is headed! It is fascinating see Comrade Hugo torpedo his own economy
to implement SOCIALISM, also known as MISERY spread WIDELY. He
is following in the footsteps of Comrade Bob in Zimbabwe. Just look at
the BOLIVAR currency, it says it all. You know, many in the BELTWAY are
BIG supporters of Comrade Hugo.

Comrades Merkel and Sarkozy are now proposing BANNING short selling on stocks
and sovereign debt throughout the Euro zone; obviously they do not like the
opinions of the public and institutions that SEE the folly of current policy
and who rationally want to vote against it, and so their solution is: OUTLAW
anyone with whose opinions they DISAGREE and OUTLAW the mechanisms with which
they do so. Not one short selling ban has halted a crash, as holders
of the poor assets are just plain old sellers exercising RISK management.

Wealth creation (producing more than you consume and fostering rising incomes)
is the only solution to preserving wealth in societies which practice credit-based
FIAT currencies. FIAT currency based financial systems ALWAYS fall into insolvency,
bond market collapses, serial quantitative easing and then hyperinflation,
without exception throughout history. THIS TIME WILL BE NO DIFFERENT. I DEFY
any analyst to show me one exception....

The destruction of the productive to feed the unproductive is cannibalism
of the worst sort. In the name of social justice, public servants in something-for-nothing
societies REFUSE to reform the welfare states of the west and implement polices
of growth. Such REFORMS spell DOOM for their futures, economies and their constituents.
IMPLEMENTING more wealth redistribution and taxes WILL FAIL to revive anything
and sets the next deepening of the unfolding crisis and depression.

Over forty years of borrowing and spending to substitute for the policies
of growth are now FAILING and the bills are now coming due. Only there is NO
MONEY, and unfortunately, economic growth and wealth creation is something
the Western world's fathers and grandfathers knew about, but for current leaders
they are but a footnote in the history books. Let me repeat: The IDIOTS at
the wheel of economic and political power are implementing policies which have
NO CHANCE of fostering economic and income growth.

The idea that a handful of brilliant minds can somehow steer an economy
is fatal to economic growth and stability. The Soviet Union's economy failed
because of its central economic planning, and the U.S. economy will suffer
the same fate if we continue down the path toward more centralized control.
We need to bring back sound money and free markets - yes, even in healthcare
- if we hope to soften the economic blows coming our way. - Ron Paul

As interest rate spreads continue to BLOW OUT, private-sector -- and some
public bond market issuance collapses -- and G-10 economies edge toward blowing
up. Their political leaders, crony capitalists and banksters are all in a panic.
Bond markets are shutting down, overnight markets are as well. Credit is collapsing
again. Every measure of credit risk is below the worst levels of last month!
As outlined in the May 6th edition of Tedbits, Black swans have taken
flight and in their wake FAT tail events are emerging on the horizon.

In Amerika terrorists inside the Beltway have implemented the policies of
an impending economic collapse. Health care reform (nothing of the sort,
it's a takeover, see video below), financial reform (before they even have
the report from the financial crisis commission, once again this is not
reform it is a politicization of the financial and banking industry), expiring
Bush tax reforms and soon ENERGY legislation (collapsing US energy production in
the name of saving you) are going to collapse the economy. All mostly ENSHRINED
into law, set to unfold and be implemented in the next several years.

Reconciliation of the financial reform bill is going on, WHERE ELSE? Behind
closed doors with four of the most incompetent corrupt public officials on
the earth doing the DEALINGS:

Or should I say political STEALING and fleecing of the public. Let's see,
(1) a bagman for Government, ... er Goldman Sachs, (2) a retiring senator who
is retiring because he has no chance of reelection (so he has nothing to lose
and can commit any crime) with (3) his gangster boss, and (4) the leader of
the finance committee which fathered Fannie and Freddie's insolvency. A more
competent crew to REGULATE the financial system couldn't be found anywhere.
HA HA. Be afraid, be very afraid.

Keep in mind, the developed world's banks and financial institutions have
over $17 TRILLION of debt they have to ROLL in the next three years, and the
assets they bought have lost up to 40% of their values. Do you think that money
will rollover or demand payment? Or perhaps demand higher rates?

Next month some of the money (almost 500 billion Euros) the EU offered banks
for during the financial crisis must roll, unfortunately it will be the seeds
of the next down leg of the EU crisis, as European banks borrowed the money
from the ECB at 1% and bought SOVEREIGN debt which is almost unsellable. Talk
about a carry trade BLOWING UP. July will be a severe test of crisis management
as these banks are increasingly SHUT out of the short-term lending markets
or have to pay up to roll. Can you say another year of unlimited borrowing
from the ECB?

In a letter last month to an industry group called the Institute of International
Bankers, Sheila Bair, chairman of the Federal Deposit Insurance Corp., went
to considerable lengths to defend a part of the Senate's financial-overhaul
bill that aims to strengthen capital regulations.

To support her case, Ms. Bair noted that the consolidated U.S. operations
of an unnamed foreign bank have "negative Tier 1 capital." In other words,
after regulatory adjustments, these banking operations have an actual capital
deficit. Ms. Bair may have been talking about Deutsche, whose U.S. bank holding
company, Taunus Corp., has a Tier 1 risk-based capital ratio of negative
7.58%, according to a regulatory filing. With $364 billion of assets, Taunus
isn't a bit player." - Peter Eavis

NEGATIVE tier-one capital? It is not isolated to these two; it is an epidemic
amongst the biggest players.

In the a previous Tedbits (May 20, 2010) I outlined the NEW special-purpose
vehicle to RESCUE/bailout and how special-purpose vehicles are only used for
DECEPTION; let's look at a graphic of the deal from a recent wall street journal:

This is being done to keep the NEW debt off their individual balance sheets
and circumvent the Euro zone rules which prohibit buying the debt of individual
EU countries.

This is a picture of public-sector deception in the light of day. When
will the markets call their bluff? When they try to issue the first tranche
of that debt is my guess. Let's see nothing from the respective EU governments
except guarantees for the special-purpose vehicle (all the guarantees are from
morally and fiscally bankrupt nations and public serpents), virtually none
of the governments have budget deficits less than 6% of GDP (see graphic above)
and their countries are not GROWING, so the debts are compounding at an inconceivable
rate.

All have OTHER OFF BALANCE-SHEET obligations which are many multiples of GDP
(which are unpayable as growth is ZERO), and of course, the ratings agencies
will rate them AAA. Politicians will lean on them to do so, this is also known
as creating "Fairy tales". Anyone who buys these offerings will get what they
deserve: NOTHING.

All of the countries are raising taxes, directly or indirectly on what few
places in the private sector actually have profits or incomes and they are
refusing to cut the public sectors in any meaningful manner. I will now take
you back to a quote from Bill Gross of PIMCO, the world's largest bond manager:

"If core sovereigns such as the U.S., Germany, U.K., and Japan 'absorb'
more and more credit risk, then the credit spreads and yields of these
sovereigns should look more and more like the markets that they guarantee.
The Kings, in other words, in the process of increasingly shedding their
clothes, begin to look more and more like their subjects. Kings and serfs
begin to share the same castle." - Bill Gross

Bingo, and it actually is a SAND castle at this point. The waves of history
are about to wash over them like the tides. Hanging like Damocles' sword over
these FRAUDSTER's, they shall soon learn history's lessons, as will investors
who have placed their faith in banksters and Big wire houses (investment banks).
Developed world governments and their financial systems are operating in BANKRUPTCY;
I hope you are not on the other side of this trade as you are now a creditor,
not an investor..... Although there is one thing you can count on them to do...
PRINT the MONEY out of thin air and hand it back to you...

No entrepreneur or business owner in their right mind would hire an employee
or plan an expansion without knowing the cost of their labor, new healthcare
mandates, availability of credit or the cost of energy and unreported tax increases
(VAT taxes, Medicare surcharges, the destruction of capital gains taxes, etc.,
the list is too long to cover, but be assured there are dozens of new taxes).
When those issues are UNKNOWABLE uncertainty reigns SUPREME and the willingness
to take risks vanishes, because there is no way to calculate the odds of success
with those VARIABLES. There will be no jobs or small business growth until
these things are dealt with.

Investors are in the same BOAT. They are confused and misled by banksters,
main stream media and Investment banks; knowing past advice has failed and
seeing that the prescriptions for future investing are no different than previously
in a world of RELATIVE returns. This is the road to disaster and poverty
for people trying to store capital and wealth in paper assets.

How many years will it be before they emerge again is the question? The answer
is as long as it takes for these changes to be knowable. Take a look at this
on- minute video of Glen Beck: www.youtube.com/watch?v=0PE4b0VFzYI It
outlines FDR's New Deal and its regulatory straightjackets, and then compares
them to the current healthcare legislation; from the looks of it, the current
lawmakers are dwarfing what took place then. THIS IS A MUST SEE VIDEO to gain
perspective. Then think about FINANCIAL reform (2,000 pages of NEW LAWS) and
energy legislation which will inevitably emerge from the accident in the gulf.
Cloaks of complexity, regulatory buffoonery and corruption are descending on
the social welfare states of the G10.

It will be years, if not a decade or more, to get over the destruction caused
by this legislation. It took over 20 years for the destruction implemented
by the Roosevelt administration's NEW DEAL to be repealed and for growth to
resume. These idiots are dwarfing those mistakes so you can expect it to take
at least equally as long this time around.

The only businesses expanding are those on the GOVERNMENT GRAVY train. They
are about to hit a brick wall just as Greece has done. Crony capitalists and
public-sector unions are the only beneficiaries -- and the private sectors
of the respective countries are on the menu, as the something-for-nothing societies
eat the productive to FEED the welfare state. When they hit the BRICK wall
then the fun really begins, political assumptions built up since 1971 are about
to meet REALITY and it will BITE. Have you ever heard a politician ADMIT a
MISTAKE and correct it? I know I haven't.

The present leadership inside the Beltway and G10 capitals has engineered
the perfect storm of destruction. In 1982, Margaret Thatcher and Ronald Reagan
had reduced taxes and regulation and dismantled much of the Welfare State,
thus setting the table for growth and wealth creation. Conversely, since 2008:
socialists have implemented the largest intrusion into the private sector in
history, they are politicizing the financial sector even more, radically expanding
entitlements, taxes and the social safety net. One approach -- the road to
recovery, the other -- road to RUIN. Public serpents and their special interest
supporters have chosen the latter.

I am tired of hearing misinformation in the mainstream press. Is gold
a bubble? No. I will provide a few graphs to illustrate the history
of other bubbles in comparison and the fundamentals versus paper creation.
First let's look at a chart illustrating some recent bubbles (from Bruce
Pile of www.goodstockinvesting.blog)
and compare the present move in gold:

Now let's look at them numerically, from Clusterstock:

Now let's take a look at gold prices in context to money supply creation (courtesy
of www.qbamco.com) versus the real gold
stock. This is the fundamental illustration of what is unfolding IN FRONT OF
US:

This is a fabulous illustration, thanks again to www.qbamco.com . What is
it saying? The fundamentals are in place to match any of the previous outlined
bubbles!!! But also that we are in the infancy of the coming move. Remember,
currencies don't float they just SINK in purchasing power at different rates,
take a look at the uniformity of the theft of purchasing power by MAJOR central
banks and their public serpent partners in crime who are printing money OUT
OF THIN AIR to fund their redistributionist schemes, stealing the purchasing
power of your money while it sits in the bank:

Those gains are the reciprocal of how much purchasing power your money has
lost while it sits in SAFE cash and US Treasuries. In other words: put negative
signs in front of those numbers to see how you have been FLEECED in terms of
purchasing power. The purchasing power of paper FIAT currencies is in FREEFALL.

Technically, the gold charts IN ALL CURRENCIES show ORDERLY long-term, secular
bull markets commencing over 10 years ago. Take a look at this chart of gold
since 2006:

This is the picture of an orderly advance, where gold spends long periods
consolidating its gains and building corrective technical formations, then
the pattern becomes active and the market goes higher in an orderly manner.
Based upon the last two technical patterns (in this chart, the reverse head
and shoulders), both of which are active, they project gold's next price move
to the $1,350 - $1,450 area. Question: Can gold back and fill and then go down
before going higher? Of course it can. That is the very definition of an orderly
market advance.

Let's
keep in mind another fundamental fact: Emerging-world central banks are sitting
on 6.3 TRILLION (Dollars, Euros, British Pounds, and Swiss Francs etc.) of
reserves in soon-to-be increasingly worthless developed world currencies, and
less than $100 billion of it is in gold. Then, think of the $200 TRILLION sitting
in financial assets around the world and the percentage of them in gold, (illustrated
by this fabulous chart by www.agorafinancial.com):

Do you think they might increasingly want to exchange progressively-worthless
FIAT paper money (IOU's of bankrupt countries) for TIMELESS, real money sometime
soon? I do! In addition to this fundamentally bullish picture, add the fact
of the GARGANTUAN short positions held by the biggest banks in the world; they
will soon face their waterloo, as they are overwhelmed by a tsunami of cash
seeking safety and lighting a short covering bonfire to their balance sheets
as well. That's a mighty small door to safety, the sooner you arrive the better
you will fare. At this point, GOLD IS NOT A BUBBLE. The bubble is in front
of us, not in the rear view mirror. Remember:

The greatest transfer of wealth from those that hold it in paper to
those that don't is under way...Wait until the BIG money PANICS. When
will they WAKE UP? A Crack- up boom looms...

Look
no further than these two charts of the ECRI economic index (from David Rosenberg www.Gluskinsheff.com),
you can easily see the wolf waves (whipsawing megaphone formations)
signifying the wild and EXPANDING oscillation in the economy caused by fiat
currency and credit creation (either too hot or too cold):

Wolves eat people and these Wolves will eat economies. You can expect this
to be coming true, heading into the last half of 2010; the economy of the US
is heading into freefall right behind the EURO ZONE. An economic bloodbath
approaches.

In
conclusion: Black swans are firmly in flight and the FAT lady is singing. Catastrophe
looms, courtesy of the chosen one and his minions in congress. The potential
opportunities to profit from this unfolding maelstrom are infinite. This is
not DOOM and Gloom, it is reality, learn to deal with it and prosper, fail
too and learn the lessons of history in REAL time.

Everything is mispriced and will move UP and DOWN to price in unfolding REALITIES.
Buy and hold is DEAD, and paper is poison. Applied Austrian economics is
the recipe for success. Learn how to diversify your portfolio and create absolute
return alternative investments and put gold behind your cash as it used to
be. This is what I do. contact me if you wish...

Public servants in G10 capitals are destroying your futures and implementing
the death of their economies ON PURPOSE to use the crisis to SEIZE power and
what's left of their respective private sectors. It is the something-for-nothings
eating their own future. It's going to be a HOT summer with lots of FIREWORKS.

Job and income growth? What job growth? Incentives matter as does the ability
to take a calculated risk in hiring a new employee or starting a new business.
Why take a risk when there is no reward for doing so?

There is no reward and there will be none; socialists never understand human
behavior except at the lowest levels of society where people are desperate
to escape POVERTY, thus becoming the mob which populous politicians prey upon,
even though they are the culprits of the economic malaise. The consequence
of their economic illiteracy and insatiable greed for power over others, along
with their progressive policies.

The problem does not lie with your small-business-owner neighbors, aka the
RICH, as your public serpents tell you. But don't worry, they will just pull
back their animal spirits and wait for better economic weather.

Battles loom between the public and private sectors to see who serves who.
The policies of Insolvency are firmly in place in the social welfare states
and are being added by the day, and it spells ECONOMIC doom. Global growth
is falling off a cliff in the developed world and the structural reform REQUIRED
will not be considered until the economic collapse is complete.

Tedbits is authored by Theodore "Ty" Andros, and is registered with TraderView,
a registered CTA (Commodity Trading Advisor) and TraderVest Clearing LLC a
GIB (Guaranteed Introducing Broker). He currently is the principle of TraderView,
a managed futures and alternative investment boutique. Mr. Andros began his
commodity career in the early 1980's and became a managed futures specialist
beginning in 1985. Mr. Andros duties include marketing, sales, and portfolio
selection and monitoring, customer relations and all aspects required in building
a successful managed futures and alternative investment brokerage service.
Mr. Andros attended the University of San Diego, and the University of Miami,
majoring in Marketing, Economics and Business Administration. He began his
career as a broker in 1983, and has worked his way to the creation of TraderView
of which he is the CEO. Mr. Andros is active in Economic analysis and
brings this information and analysis to his clients on a regular basis. Ty
prides himself on his personal preparation for the markets as they unfold.
Developing a loyal clientele.

For greater insight into the philosophy behind Tedbits, have a look at
the Tedbits Overview -
To help understand our mission in serving you, the TedBits Overview gives
a broad description of what's unfolding globally and what you can expect
from Tedbits as a regular reader.

DISCLAIMER AND TERMS OF USE: While TedBits strives to present accurate
and useful information, we make no guarantee of accuracy or completeness.
All information and opinion expressed herein is subject to change without
notice. Opinions and recommendations contained herein should not be construed
as investment advice. Under no circumstances does the information in this
column represent a recommendation to buy or sell any securities or commodities.
Do not assume that any recommendations, insights, charts, theories or philosophies
will ensure profitable investment. The information contained herein is for
personal use only.

Gold and silver backed means that various commodity options strategies in
gold and/or silver may be used. When buying options, you may lose all of the
money paid for the option. When selling options, you may lose more than the
funds received for selling the option. Strategies using combinations of positions,
such as spreads or straddles, may be as risky as taking a simple long or short
position. A high degree of leverage is used to buy or sell a sufficient quantity
of options and/or underlying futures contracts equal to the value of the entire
portfolio. The high degree of leverage can work against you as well as for
you and lead to large losses as well as large gains. Absolute-return is not
meant to imply that a positive return can or will be achieved. Absolute-return
describes investment strategies which are designed to have the potential to
succeed in rising, market-neutral and falling market conditions. Gold and
silver backed and absolute return investments do not mean the investor will
take actual physical possessions of any precious metal. Nor should any promise
or guarantee be implied that such investments will perform better than any
other investment in any possible future scenario described herein nor that
such investments can or will preserve or protect in such possible future scenarios.

TedBits may include information obtained from sources believed to be reliable
and accurate as of the date of this publication, but no independent verification
has been made to ensure its accuracy or completeness. Many of the statements
and views made are the opinions of the author. Opinions expressed are subject
to change without notice. This report is not a request to engage in any transaction
involving the purchase or sale of futures contracts or options on futures.
There is a substantial risk of loss associated with trading futures, foreign
exchange and options on futures. This letter is not intended as investment
advice, and its use in any respect is entirely the responsibility of the user.
Past performance in never a guarantee of future results.